Will ensure free trade pacts are mutually beneficial: FM Arun Jaitley

BJP has said the appointment of defence secretary Shashi Kant Sharma as Comptroller and Auditor General can lead to a potential conflict of interest. (Pic by BCCL)NEW DELHI: India will not 'indiscriminately' enter into free-trade agreements (FTAs) and ensure that such deals are mutually beneficial, Finance MinisterArun Jaitley has said, promising to address concerns that these agreements have not been beneficial to India.

Speaking at the 'India Summit 2015' hosted by The Economist, the finance minister said the government will not go soft on black money, promised measures to protect the steel industry from dumping, resolve outstanding tax issues quickly and press ahead with tax reforms.

"We are certainly going to look at trade deals which are mutually beneficial to both the trading partners. Trade deal merely because it is part of economic diplomacy is not essential," Jaitley said, replying to questions on FTAs and India's decision to defer negotiations with the European Union (EU) on the proposed trade pact.

The domestic industry, exporters and policy makers have time and again raised concerns over these pacts, saying that they have negatively impacted the domestic industry while benefiting India's trading partners.

"We have entered into large number of trade deals but entering indiscriminately into (free) trade agreements and then having concerns a few years later is not the wise thing. I think it’s better to move carefully but surely," he added. Expressing disappointment and concern over the EU banning the sale of around 700 pharma products clinically tested by GVK Biosciences, India last month deferred talks with the EU on the proposed free-trade agreement.

Chief negotiators of India and the EU were scheduled to resume the negotiations on the Broadbased Investment and Trade Agreement (BTIA).

There has been a rise in the number of cases of abuse of provisions of trade agreements, especially the country of origin rules

Jaitley said the government has received a number of grievances from the domestic industry against the FTAs that the country had signed in the past. "A trade policy and foreign policy operate in different directions. One need not necessarily dictate the other," he added.

There has been a rise in the number of cases of abuse of provisions of trade agreements, especially the country of origin rules. From colour television sets, gold, aluminium, instances have grown laying bare loopholes in the provision and hurting the domestic manufacturing sector.

A recent crackdown on consumer durable manufacturers by the Directorate of Revenue Intelligence prompted a few to ramp up manufacturing capabilities in India as they could no longer import cheap final products under FTAs.

Domestic steel players have been demanding withdrawal of the commodity from the free-trade pact with Japan and South Korea. But, the minister said, the country needs trade and manufacturing and "therefore India is not going to lag behind as far as trade deals are concerned".

The country is negotiating over a dozen pacts including with Australia, New Zealand, Israel and Indonesia.

TAX ISSUES AND REFORMS

On taxation issues, Jaitley argued that the government’s taxation roadmap is clear and that it would be wrong to describe all tax demands as ‘tax terrorism,’ as most tax demands are legitimate. The finance minister said the government has substantially put the whole idea of retrospective taxation to rest."Of the major legacies issues, only one or two are left. I do not see much time before they are put to rest. The instability in tax administration is now being slowly (resolved)," he added.

The finance minister said the government is trying to bring that taxation levels to global standards and make taxation assessment and return simpler by eliminating a lot of exemptions.

"The government in the next few days will bring out a list of tax exemptions to be phased out as part of the exercise to reduce corporate tax rate to 25 per cent in four years," he added.

BLACK MONEY

Jaitley said the government will not go soft on the issue of ‘black money’ because, ultimately, the target of any economy as it grows is to bring more and more resources into the system.

"I have delegations coming to me saying even on domestic black money please go easy, because this is at least adding to economic activity. Now, no economy can indefinitely sustain an argument of this kind," he added.

A harsh law to unearth black money kicked in from July 1 this year. Offenders have a three-month window ending this month to come clean.

BANK NPAS

On the issues in the banking sector, primarily bad loans, the finance minister said it is a matter of concern but there is no ground to panic. "We are looking at each of the sectors which are responsible for contributing for the major chunk of the NPAs of banks," he said, adding the sectors in stress are steel, power, state electricity distribution firms, highways and textiles.

Jaitley said the government has taken various steps including professional mechanism of appointment and capitalisation support to strengthen state-run banks. "In fact, after inheriting the banks in a fragile situation, we are systematically trying to address each of these problems," he said, adding that even after this, if there is a fragile bank, the government will look at its consolidation with stronger banks.